Haggling with Your Lender in Pre-Foreclosure
Contrary to urban myths you’ve been reading about the foreclosure crisis in our country, your bank doesn’t want to take your home away from you, especially if you owe more on it than it’s worth. The bank would prefer to collect monthly payments from you over the life of the loan, which in all probability is pretty much the rest of your life.
And if your bank believes it can accomplish this goal by cutting you a little slack, it’s going to be willing to make a deal. This posting reveals the options that most lenders are willing to consider.
Since there is a lot that can be done, I’ll give you two parts. Here is Part I.
1. Contacting Your Lender ASAP
If you’re a card-carrying member of the National Procrastinators Society, we encourage you to cancel your membership — at least until you’ve resolved your foreclosure issue. As time passes, options fade away:
- You can’t negotiate a forbearance after the bank forecloses.
- A bank won’t accept a deed in lieu of foreclosure after it initiates foreclosure. (However, the bank may be willing to exchange cash for keys if it can get you to move out earlier, after the foreclosure sale.)
- You won’t have enough time to sell the house yourself, if that’s something you want to do.
- You may run out of time to obtain a loan to reinstate the mortgage.
- After the redemption period expires, assuming your area has a redemption period, you lose the home, no questions asked.
2. Practicing the Three C’s of Working with a Loss Mitigator (Communication, Composure, Credibility)
Most banks that handle mortgage loans have a loss mitigator (a person dedicated to assisting borrowers to avoid foreclosure and making sure the bank loses as little money as possible from bad loans). The loss mitigator is the person you want to deal with, because the person can assist you in the following ways:
- Analyze your options.
- Convince the bank that negotiating with you is in the bank’s best interest.
- Negotiate a forbearance, reinstatement, or short sale.
- Assist you in selling the house (if you choose to do so) by researching information pertaining to the house, including the title and market value; referring you to a real estate broker who can sell the property quickly for the best price possible; and overseeing the closing if one can be arranged.
Next time, we’ll look at things like how to catch up on payments over time, and reinstating the loan like nothing ever happened.
Remember, though, the sooner you contact your lender the more responsive they will be.
| posted by Ralph R. Roberts, GRI, CRS Author of Foreclosure Self-Defense For Dummies Learn More Here |
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Are you facing foreclosure? This no-nonsense guide helps you size up all your options and increase your chances of saving your home. You'll see how to delay foreclosure, form a plan of attack, negotiate solutions with your lender, and restore your financial health. Discover field-tested strategies for dodging the foreclosure trap or getting out from under a house you really can't afford. 
Ralph R. Roberts, CRS, GRI, is a highly sought after speaker, consultant, author, and personal coach. Since he first started selling real estate in 1979, Ralph has sold over 10,000 homes, propelling Time magazine to call him "the best-selling REALTOR® in America." 
September 1st, 2008 at 1:34 pm
Even though people don’t realize lenders do not want people’s property. They have options to help borrowers through difficult financial times. Of course the further behind you become, the harder it will be to reinstate the loan and the more likely that they will lose their house but that does not mean that people cannot overcome such situations.
September 2nd, 2008 at 1:13 pm
[...] my last blog post I mentioned the three "C’s" of dealing with a bank’s Loss Mitigator [...]
October 17th, 2008 at 9:26 pm
I was in contact with the loss mitigation person for Washington Mutual with a financial plan - sending them two certified letters - then they were taken over by the feds - and now I don’t know who to contact to get another loss mitigation person. The plan that I proposed was to have them take most of my social security on a 40 year principle only loan - which would pay off the loan plus. My wife is younger than I so that could be accomplished. That is the only plan that I could come up with that would allow them to recover all of their funds.